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Internet Time Group
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2001Internet Time Group, Berkeley, California
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Leveraging the People Value Chain:e-Business Necessity
by Jay Cross, Internet Time GroupExecutive Summary..........................................................................................1
Executive Summary
e-Businesses are being held back by a lack of people with the ability to execute.Execution requires people who are innovative, fast, decisive, and focused.Looking at investing in people holistically, as a “people value chain,” offers asolution.A radical example drives home the point. Imagine linking into a learningenvironment that enabled your people to devote half their time to learning to do abetter job. The author suggests that gains in productivity, reduced attrition, easierrecruiting, greater loyalty, and a stronger team outweigh costs two to one.Yesterday’s assets are tomorrow’s liabilities. Today’s knowledge becomestomorrow’s garbage. Distance is dead. Time itself has sped up. Cycles are faster.Competitors sprout up like bamboo in the tropics. Everything happens on Internettime.Leaders have shifted their focus from static to dynamic, from physical to virtual,from financial results to financial expectations, from machines to people, fromgoods to services, from analytical to intuitive, and from institutions to individuals.Knowledgeable, can-do people are the heart of competitive advantage. Keepingthem informed and inspired is vital. More than ever, people matter, for humaningenuity is today’s scarce resource.Just keeping up steals the time we need to plan for the future. We fall furtherbehind with every step forward. A prominent Silicon Valley CEO said, “We’reracing down the highway at 150 mph, and we know there’s a brick wall up ahead
Internet Time Group
©
2001Internet Time Group, Berkeley, California
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somewhere.” That was two years ago. Today the speedometer is approaching500 mph.Let’s slow down for a few minutes to think about what makes an enterprisesuccessful and what you can do to improve your firm’s overall value.
Improving shareholder value
Shareholder value (AKA market capitalization) is a function of competitiveadvantage, and organizations achieve it by focusing on core functions.Everything else is an unnecessary distraction. This is the thesis convincinglydescribed by Geoffrey Moore in his recent book,
Living on the Fault Line
.
When Moore makes his case, he describes a world turned upside down by theInternet. Money, software, and service providers, once scarce, are now plentiful.Today’s scarcities are time, talent, and management attention.
Scarce ResourcesIndustrial Age New Economy
MoneySoftware/computingService providersTimeTalentManagement attention"Managing for shareholder value"means focusing on strong,sustainable competitive advantage.
Drivers of high-tech industries nowvisit us all as the fever pitch ofInternet time drives a seismic fault
under commerce of every stripe. Allbusinesses must concernthemselves with market segmentleadership, execution focus, and differentiated offerings.How do you maintain that focus? By putting today’s new scarcities – time, talent,and management attention -- to best use. Invest where you will get the highestreturn. Concentrate time and talent on core activities. Outsource everything else.(Your context is someone else’s core. ADP can process your payroll cheaperthan you can. SmartForce can train your people faster and better than you can.)
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Living on the Fault Line
by Geoffrey A. Moore, 288 pages, (May 2000) Harperbusiness; ISBN:0887308880
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The offices of Moore’s Chasm Group are about four miles from the San Andreas Fault. TheRedwood City headquarters of SmartForce is six miles from the San Andreas. Internet TimeGroup is three blocks from the Hayward Fault. Silicon Valley knows earthquake talk.
Internet Time Group
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2001Internet Time Group, Berkeley, California
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Talent and attention relate to the human ecology of your organization. Focusingon core boils down to leveraging your human capital value chain -- getting theright people and getting the most from them.In the new economy, the yardsticks used by Warren Buffett and
his
mentor,Benjamin Graham, no longer jive with equity valuations. Today what is off thebalance sheet is often worth more than what is on it.Sixteen months ago, Forbes joined the search for new yardsticks, saying:“Intellectual capital has yet to be adequately measured. Intangible assetslive up to their name. They are typically amorphous, subjective, and hardto pin down.
What really counts?An extensive number-crunching exercise
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isolated these as the most importantnon-financial determinants of value:
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Innovation
2.
Ability to Attract Talented Employees
3.
Alliances
4.
Quality of Major Processes, Products, Or ServicesPeople skills make all the difference. Isn’t it ironic that in the Internet age,technology doesn’t have any impact on valuation?Forbes/E&Y confirms that leveraging your people is the key to shareholderreturn.
The People Value Chain
For decades, executives have said that people are their most important assets.What’s different now is that they mean it. Merrill Lynch makes a convincingargument that:At no previous time has human capital been so important, meaningfinding, developing, and retaining knowledge workers will be mission-critical functions – and high growth sectors – in the new economy.”
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Forbes ASAP, April 3, 2000
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SeeIntroducing the new Value Creation Index, Forbes ASAP, April 3, 2000.Statistically, the real intellectual-capital drivers are not what most people thinkErnst & YoungCenter for Business Innovation and the Wharton Research Program on Value Creation inOrganizations. By Geoff Baum, Chris Ittner, David Larcker, Jonathan Low, Tony Siesfeld, andMichael S. Malone
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Merrill Lynch,
The Knowledge Web
, May 2000.
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